03/09/2013 Weekend Update

[Cobra]

Algo from stocktiming could be showing potentially even bigger divergence (NYA huge up the next week then the divergence might be erased, so I say potentially), if indeed, then the next pullback would be larger than the pullback we just had 11 trading days ago.

[Cobra]

I don't see anything worth blah blah on either II or AAII.

[Cobra]

Smart money short (hedge) increased a lot.

[Cobra]

VIX SPX divergence or not, the next week holds the key.

[Cobra]

The weekly stock picks performed very good as long as you know how to use BUY STOP.
viewtopic.php?f=10&t=842&p=121567#p121567

[Cobra]

Stock picks for the next week.
viewtopic.php?f=10&t=849&p=121569#p121569

[kenttown]

Current mercury retro period ends March 17. Normally during these periods a trend starts, changes course halfway through and ends within 1% of where the cycle began (ie low 1500 SPX). Last mercury rx period shows how this cycle normally pans out.

[Kato]

SPX divergence with CRB is getting uncomfortably large. While "this time might be different" and the divergence might get even larger (2000) the probabilities are increasing that this bull is close to exhaustion.

[taggard]

re impending end of the universe as we know it--

1. i agree we are getting close--but close is huge in time given what we know of the past.
2. slap up a monthly chart of spx put on a 10 ema and a set of Bollinger Bands or a simple 20 ema
3. the tops in 2000 and 2007 were months long--2007 was 7 months (the way i see it)
4. the odds are no matter how crazy it gets we have a 3-5 month top. this is an eternity in day or even swing trading
5. people are using up tons of energy and missing tons of longside trades on the way up. When you read in the media about how people are dissing the rally--examine your posts and trades.
6. catching the exact top is all about going down to the 99 cent taco place and bragging in front of the guys. Generally you would not trust these guys to go across the street with 3 bux and buy you a cup of coffee--so their opinions on your trades are likely not mission critical. Making money is all about just watching and nailing to the wall--that second move up--and then the second top.
7. the key is the retest of (1) the last high. (2) the prior trend.
8. consider uempel analysis of soros I guess it's because he's not in a hurry, because he can wait, wait, wait. Looks like he is comfortable in his own skin, enjoying life. Doesn't look tense at all. Arrives for an interview with the FT in some mini-car driven by a chauffeur. Laughs, drinks - but is also incredibly wise/savvy/hard working/tough.

90% of trading is waiting with an open mind--calm not anticipating because it knocks us out of trades prior to the event. emotions steal energy. because technical traders focus on "typical probabilities" they find this or that indicator or even price action being stretched near highs. i have started reading about how "the market is corrupt since it didn't do this or that near a bollinger band" or people shorting overnight or over the weekend which has failed over and over. all this is emotion. keep this in mind--there are period of time in the markets when you are out on the edge of the bell curve--around here we call it "getting tail". during these periods you want to be extra relaxed--the effect is flying though fog with a mountain out there someplace and the instruments messing up. what's key is to keep a sharp eye out the window--and actually watch for the event. you don't have to turn the plane 6x before the event--you don't have to scream about how this or that is bogus or the market is rigged. dude if you are sure the market is rigged--you are set for life--just trade the rigged.

all this is just my opinion--but i have found it better to be less sure--and more relaxed and try to move very quickly when the mountain shows up in the fog. yes it could very easily be next week--but it could easily be the following week--deep breathing and stay frosty. doing less is often the right move. if you are new in trading--pull up the monthly charts and look at what is noted above--then focus on paper trading the first high--and put your money into the second one. try to be as self aware during the whole process as you can--often writing down every call you think or make on a spread sheet will make you more than any trade. what you are looking for is a multiple calls situation where you anticipated something for 4-5 trades or calls--and then it happend. if this is shows up you have a choice--you can take a deep breath and correct this--or you can use it wisely by making small trades until the really decent swing comes along.

good luck with your trades

[ClarkW]

re impending end of the universe as we know it--

1. i agree we are getting close--but close is huge in time given what we know of the past.
2. slap up a monthly chart of spx put on a 10 ema and a set of Bollinger Bands or a simple 20 ema
3. the tops in 2000 and 2007 were months long--2007 was 7 months (the way i see it)
4. the odds are no matter how crazy it gets we have a 3-5 month top. this is an eternity in day or even swing trading
5. people are using up tons of energy and missing tons of longside trades on the way up. When you read in the media about how people are dissing the rally--examine your posts and trades.
6. catching the exact top is all about going down to the 99 cent taco place and bragging in front of the guys. Generally you would not trust these guys to go across the street with 3 bux and buy you a cup of coffee--so their opinions on your trades are likely not mission critical. Making money is all about just watching and nailing to the wall--that second move up--and then the second top.
7. the key is the retest of (1) the last high. (2) the prior trend.
8. consider uempel analysis of soros I guess it's because he's not in a hurry, because he can wait, wait, wait. Looks like he is comfortable in his own skin, enjoying life. Doesn't look tense at all. Arrives for an interview with the FT in some mini-car driven by a chauffeur. Laughs, drinks - but is also incredibly wise/savvy/hard working/tough.

90% of trading is waiting with an open mind--calm not anticipating because it knocks us out of trades prior to the event. emotions steal energy. because technical traders focus on "typical probabilities" they find this or that indicator or even price action being stretched near highs. i have started reading about how "the market is corrupt since it didn't do this or that near a bollinger band" or people shorting overnight or over the weekend which has failed over and over. all this is emotion. keep this in mind--there are period of time in the markets when you are out on the edge of the bell curve--around here we call it "getting tail". during these periods you want to be extra relaxed--the effect is flying though fog with a mountain out there someplace and the instruments messing up. what's key is to keep a sharp eye out the window--and actually watch for the event. you don't have to turn the plane 6x before the event--you don't have to scream about how this or that is bogus or the market is rigged. dude if you are sure the market is rigged--you are set for life--just trade the rigged.

all this is just my opinion--but i have found it better to be less sure--and more relaxed and try to move very quickly when the mountain shows up in the fog. yes it could very easily be next week--but it could easily be the following week--deep breathing and stay frosty. doing less is often the right move. if you are new in trading--pull up the monthly charts and look at what is noted above--then focus on paper trading the first high--and put your money into the second one. try to be as self aware during the whole process as you can--often writing down every call you think or make on a spread sheet will make you more than any trade. what you are looking for is a multiple calls situation where you anticipated something for 4-5 trades or calls--and then it happend. if this is shows up you have a choice--you can take a deep breath and correct this--or you can use it wisely by making small trades until the really decent swing comes along.

good luck with your trades

Outstanding post Taggard as always! Big fan of your posts. Psychology of investing isn't discussed nearly enough, you have it down and it's greatly appreciated! Thanks

[nightlyhawk]

This chart shows bulls might get exhausted and these patterns might get repeated. I guess it won't get confirmed until green line crossing below lower BB.

[ClarkW]

Anyone have any thoughts on Corn? Lots of overlap on these waves down. Looks like it MIGHT be ready to change course

[ClarkW]

Long-term one has to assume GDX is somewhere near a bottom with $BPGDM at 3.33 but that process could take a couple months.
$HUI
- Notice $HUI's bottom this past week was just above 61.8% fib retracement. It bounced nicely of 50% but sliced through 38.2% like butta.
- RSi and TSI have only been this low or slightly lower one other time in the past ten years but if you go out to the late 90's and '00 she got lower with some serious panic sellers
GDX
- ChiOsc is the lowest on record (weekly) but it doesn't have the longevity that $HUI has so...
- It too bounced off the 50% level nicely twice and disregarding the 38.2% level. Hasn't quite got to the 61.8% level

Will GDX get down to the blue dotted trendline (provided by the great Trader Girl)? Who knows but GDX is likely to be a fast mover in the next couple weeks.

[gappy]

box.png

End of day Friday. GLTA next week. S/P Capitol IQ's latest propaganda, well I can't post it, it opens to my files, guess they don't want to give it away.

[uempel]

If SPX keeps on climbing higher the index will negate these long term weekly patterns. In my view this is highly unlikely. Intraweek the index might shoot higher, but by Friday 15th (Triple Witch) SPX should be back under the blue line

Close-up of the same chart:

[Out of Bounds]

Interesting study I did this evening, have a look:
http://www.freestockcharts.com?emailCha ... b2cdfb5a65

[TraderGirl]

Damn...weekly charts point to BTFD this week...looks like if we get a pullback on Monday...then we could be up into 15-18th for wave 5 of 5...

[nightlyhawk]

If SPX keeps on climbing higher the index will negate these long term weekly patterns. In my view this is highly unlikely. Intraweek the index might shoot higher, but by Friday 15th (Triple Witch) SPX should be back under the blue line

The attachment 77.png is no longer available

Close-up of the same chart:

The attachment 78.png is no longer available

This chart seems to support your view.

[uempel]

I checked my weekly chart with Fibs - and they seem to confirm that the SPX 1550 area is toppish

If SPX keeps on climbing higher the index will negate these long term weekly patterns. In my view this is highly unlikely. Intraweek the index might shoot higher, but by Friday 15th (Triple Witch) SPX should be back under the blue line

The attachment 77.png is no longer available

Close-up of the same chart:

The attachment 78.png is no longer available

[taggard]

[quote="uempel"]If SPX keeps on climbing higher the index will negate these long term weekly patterns. In my view this is highly unlikely. Intraweek the index might shoot higher, but by Friday 15th (Triple Witch) SPX should be back under the blue line

so long term charts--oh yeah. something in reference to the 1570-1600 area happens--if we use the rule-o-thumb--of day trading stuff stalls near old major highs. we see this constantly on intra day and swing trading--but most people are not drawing in that horizontal line on a 15 year monthly chart--that you see here (actually a small slope so it targets 1600 ish). Also just as we see day trading often stuff near prior days or weeks high--acts like an attractor. often we can see something subtle on a 5 min chart when a prior high or low is broken--so in this case we go higher than 1600--this can then be confirmed if the "pull back" is blunted.

we had a guy post (i think) after hours asking "why cobra was touting the whole evil plan"--his question was "how do we know it's not a new bull". again for beginners or those with rapture of the highs--(1) if it's not a clean breakout and tested from above--do not assume as you reach major 10 year highs in a (so far) secular bear market--that there is a new bull. (2) but oddly often it's ok to trade towards that test--as you have the attractor principal. KEY NOTE--this was the idea at 1350 1450 and maybe 1500 at 1550 try to appreciate we are now trying to figure out if this is the german attack on stalingrade (eg lots of bodies near the seeming german new bull market only to end in hideous defeat with bears high-fiving) so take plenty food water and warm clothes if you are getting long in size here at 1550.

it's not that cobra was "right" or "wrong" about the 3 hit up move lets say that topped out at 1540 or something--and we get turned back at 1590--cobra would be "substantially correct" even if "the exact move was outside the little lines. great art is not first and foremost concerned with keeping the crayon inside the lines--that is accounting. great art attempts to covey really epic ideas feelings experiences--it's inclusive rather than exclusive (that means 50-70 points doesn't mean much in a 1600 point call--it just means (1) you got your money's worth from the site 10x over again (2) that life can be =/-5%--esp should you encounter some epic short covering near a key location). i think using the line at the top on uempel's is less work--but they are both so close--that either makes the point in a valid way (in my opinion)

KEY IDEA --all this is meant in no way to diss the guy who posted after hours--it's sort of a long indirect answer to his question. the short version is--it's a bull when it happens and they test it otherwise we are in a secular bear on spx until further notice. (whatever is going on will continue until it ends) asking questions is good. So if you are new to trading ask them--hopefully somebody here will get on it and answer them.

on another note--stories like this one below from people who in theory should know better--what's key is in the last week with the dow cracking it's old math (everyone ignored the rut 2k when it did the same thing because it's considered flaky not something real like the dow jones in-dust-real average). after you have been around you will read these stories and cringe--it makes you want to load food and water into your lambo and head for the hills. there have been a ton of stories some of which attempted to address the whole "when it looks good you might as well hyde someplace". but when you read the stories they are 90% bullish with some guy saying "maybe just take a little of the table".

KEY IDEA--new traders should treat cautiously around "sentiment". so i wouldn't trade off this stuff unless you have been at it a while--but i would watch it carefully (after hours) for a while. soros pulled off that pound trade on one line of text ("dudes the pound is cool we will not need support") so it's a matter of practice. for now the point is if you are in a bear--close to the 10 year high--take a real deep breath--and wait till they prove it--worse case if you are wrong you lose 10% if you are right you make whatever trading the 40% decline.

the best headline other than this one i found was "with the dow at a high--the bears are soooo boring" (cnn)

Dow 36,000 Is Attainable Again

The Dow Jones Industrial Average set a record this week, but it’s still far from the mark that economist Kevin Hassett and I forecast in our 1999 book, “Dow 36,000.” (So these guys didn’t say a thing till now—they were exactly wrong in 1999—and one of them is an economist. Look I love data—but going to a econ guy to figure out the market is like going to a nun to find out how to have good sex. econ data and price action have a tenuous relationship at the best of times--eg tops happen when the future is so bright you have to wear shades and bottoms happen during periods where you have to think "been down so long it looks like up to me" (book from the late 60s)

We wrote in the introduction that “it is impossible to predict how long it will take” to get to 36,000. Then, in the same paragraph, we rashly made a guess anyway: “between three and five years.” Today, the far edge of that time frame is clearly in reach. From its low of 6,547 on March 9, 2009, the Dow has risen 117 percent. Another 117 percent in four years would put it at 31,022, just 16 percentage points shy of the magic number.

(so pop quiz—we are in a secular bear market and the dow is up 117% (a) it is more likely to pull back (to at least test support). (b) it is more likely to double. The correct time to tout this silly 36k stuff is after we breakout spx and confirm a new bull by failing to go down after that breakout—yet we do retreat enough to test that breakout. Again like the cop shows—the criminals test the illegal drugs they are buying to see if they are real—shit’s real when it happens clearly—until then. . .? dream on. So these guys could be right—anything is possible and they have been touting the same idea (incorrectly) for 14 years—obviously if this keeps up long enough they will finally be right. i would feel a whole lot better if they blatantly admitted they messed up--and then doubled the time frame indicating they learned something from that mistake. )

When we wrote our book, we expected that the stock market, as represented by the 30 blue chips of the Dow, would rise to 36,000 for two reasons.

First, investors had mistakenly judged the risk in stocks to be greater than it really was. Here, we drew from the work of Jeremy Siegel of the Wharton School of the University of Pennsylvania. He showed that, over long periods, stocks were no more volatile, or risky, than bonds.

(yeah right. . .except in fact “investors had mistakenly judged risk in stocks to be less than it really was at spx 1500 this author doesn’t even point this out—and tries to lay off the mistake on the warton school. Dude down here at the 99cent Taco Stand where we hang out—you buy into it you die from it.)

We saw indications that the risk aversion of investors was declining -- as we believed it should. Lower perceived risk would mean higher stock valuation measures: rising price-to- earnings ratios, for instance.

Second, we assumed that real U.S. gross domestic product, the main driver of corporate profit growth, would rise at 2.5 percent a year -- a bit below the historic post-World War II rate, but still a decent clip. We warned, however, that small changes in growth rates could have big effects on stock prices.

The heightened fears of investors are reflected in lower valuations. Currently, for example, the forward P/E ratio (based on estimated earnings for the next 12 months) of the Standard & Poor’s 500 Index is about 14. In other words, the earnings yield for a stock investment averages 7 percent (1/14), but the yield on a 10-year Treasury bond is only 1.9 percent -- a huge gap. Judging from history, you would have to conclude that bonds are vastly overpriced, that stocks are exceptionally cheap or that investors are scared to death for a good reason. Maybe all three.

One way stocks could jump to 36,000 quickly would be for fears to subside and P/E ratios to rise. Assume that earnings yields fall to 5 percent. That would mean P/E ratios would go to 20, a boost of 50 percent in stock prices, assuming constant earnings.

The second thing that’s been unexpected since our book came out is that U.S. growth has drastically slowed. Instead of the historic rate of 3 percent, or our projected rate of 2.5 percent, actual annual real GDP increases from the end of 1999 to the end of 2012 averaged just 1.8 percent. Inflation was lower than normal, too, so the nominal rate of growth was only about 4 percent, instead of about 6 percent.

Growth Matters
If you knock two percentage points off nominal growth a year -- and assume that this lower growth continues -- then the value of a business, which is determined by the present value of all the profits it will ever earn, will be dramatically depressed.

Let’s set investor fears aside for a moment. For investment gains over the long term, there is absolutely no substitute for faster economic growth.

To get it, we need policy changes that will create a better environment for businesses to increase revenue, profits and jobs: a rational tax system that keeps rates low and eliminates special deductions and credits; immigration laws that encourage the best and the brightest to move here and stay; entitlement reform to bring down costs and provide incentives for productive seniors to keep working; sensible environmental, workplace and financial regulation that allows entrepreneurship to thrive; a K-12 education system that boosts student achievement and holds teachers, administrators and politicians accountable …

(well folks what are the odds in the next year of this happening? we cannot be thinking "dudes all we need is a rational tax system when we are in serious economic trouble forcing us to print or borrow 2 trillion a year--so lets get out and buy those 3 year out of the money call leaps now before the price spikes". at best we can hope (and they put it in the bottom of pandora's ripped off chest for a reason) some of these situations come about as a result of the next 3-6 years.

Chime in and make your own list, because it’s time to focus on what counts in an economy: growth. Even with relatively high risk aversion (let’s say, what we have now), faster growth would significantly increase stock prices.
How fast can the U.S. grow? Four percent is attainable, but I’d settle for 3 percent. Get there quickly, and we’ll get to Dow 36,000 quickly, too.

(ok so lets focus on growth—right now we have 1/10 of 1% gdp growth in the last quarter—and this guy knows we will get 3% this year and for the next 4 or so? every indication including current conditions seems to suggest that is unlikely despite the gdp figures tending on average to underestimate inflation as observed here on the street when i go and buy stuff)

good weakend to all--and lets see if uempel and cobra are "substantially correct" which is totally great when you really think about it a second